End of Financial Year is Review Time - Peter Vickers Business Group

31May

End of Financial Year is Review Time - Peter Vickers Business Group

EOFY in review | 31 May 2017 |

The end of the financial year is the time to do a final review of your tax affairs for the current year and to do your tax planning for the new financial year. It is no longer acceptable to do last minute tax manipulation when you prepare your income tax returns after the year-end. Tax and the flow of tax payments need to be planned well in advance so that they do not look like deliberate actions to avoid tax. It is also a good time to review your financial objectives and challenges and to ensure you understand the tax implications of key business decisions under consideration.

Year End Planning

With a month to go, there is still time to implement tax-planning strategies to reduce your tax exposure before 30 June. It’s time to do your housekeeping. Bad debts must be written off or you can’t claim them as a deduction. Obsolete stock must also be scrapped or disposed of, as must worthless plant and equipment, before 30th June. Keeping it in the basement or at the back of the yard is not good enough. Investments that are showing a loss and no longer form part of your investment strategy should be disposed of so that you can offset the loss against any realised capital gains. You can also ensure that you make any necessary repairs before the 30th June.

$20,000 immediate asset deductibility for small business.

There is also a nice bonus for small businesses besides having a slightly lower tax rate. If a small business purchases a depreciable asset for less than $20,000 then it can be written off this year instead of being depreciated over its useful life.

We do not recommend spending up to $20,000 on an asset unless it is genuinely required by your business At first glance this sounds like a valuable concession but there’s a list of qualifying conditions. Even “what is a small business” has a complex definition.

The ATO have made it clear that they will be monitoring the use of this concession to ensure that the write off rules are being adhered to. This has now been extended till 30 June 2018 and applies to businesses with turnover up to $10 million.

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